Why is there no federal “debt” or “deficit,” and 7 other interesting questions.

[According to the MonopolyⒸ game rules, money is unlimited; if the Bank runs out of money it may issue as much as needed “by merely writing on any ordinary paper”.]

BACKGROUND
We previously have discussed the parallels between the MonopolyⒸ game’s Bank and the U.S. federal government. Both are Monetarily Sovereign, which means:

Image result for four column chart — Create a column for each player.

They cannot run short of money.
They have no need to borrow money.
They do not need to collect taxes.
And the taxes they collect are destroyed upon receipt.

Let’s say you wish to play the MonopolyⒸ game with three friends, but when you open the box you find it has no money.

What do you do?

The paper “money” in a MonopolyⒸ game merely is a convenience, not a necessity. The game can be played in exactly the same way, without paper MonopolyⒸ dollars.

You simply can draw four columns on a sheet of paper — one column for each player. Then you write 5,000 (or any amount) at the top of each column. The total of the columns (say, 20,000) is the total amount of money in the game.

When any player spends money, you deduct that amount from the last number in the column, and when any player receives money, you add that amount.

But what happens when a player is required to pay money to the Bank? There is no column for the Bank. So, you simply deduct that amount from the player’s column.

Since the bank has no column, the money is destroyed. No record is kept of Bank “deficits.” The total in the game is now less than 20,000 MonopolyⒸ dollars.

This is similar to what happens when you pay taxes to the federal government. Although the federal government keeps a record of that payment, it doesn’t use those dollars for anything. Effectively, the U.S. dollars are destroyed.

And, like the MonopolyⒸ bank, the U.S. federal government creates brand new dollars, every time it spends.

And what happens when the MonopolyⒸ Bank spends money (for instance by paying 200 dollars when a player passes “GO”)? You add that 200 dollars to the appropriate player’s column. The total money in the game now increases by 200 Monopoly dollars.

The MonopolyⒸ Bank doesn’t have debt, because it simply creates new MonopolyⒸ dollars by the very act of spending. Similarly, the federal government creates new U.S. dollars by the very act of spending.

QUESTIONS
1. What is the federal “deficit”?
The so-called “deficit is the misleading name given to the difference between the amount of money the federal government collects vs. the amount it spends.

The deficit is just an arithmetic difference; it does not imply a real financial relationship between collections and spending.

Reductions in federal debt growth introduce recessions (vertical gray bars). Recessions are cured by increases in federal debt growth.

The federal government has the unlimited ability to create U.S. dollars, so the deficit merely shows how many dollars the government sends into the economy compared to the number of dollars the government takes from the economy.

Thus the so-called “deficit” more properly should be viewed as an “economic surplus.”

Because deficits add dollars to the private sector, they are necessary to cure recessions and depressions.

2. What is the federal debt?
The government accepts deposits into U.S. Treasury Security accounts. The purpose of these accounts is not to supply the government with dollars (it creates dollars at will), but rather:

To help the government control interest rates.
To provide the world with a safe “parking” place for unused U.S. dollars, which helps stabilize the dollar.

The total of deposits into the U.S. Treasury Security accounts is misleadingly known as the federal “debt,” though the accurate term would be “deposits.”

3. Do federal taxpayers pay for the federal debt?
These T-security accounts pose no burden on the federal government or on taxpayers. The government pays interest into these accounts by creating brand new dollars.

The accounts are paid off by sending the dollars that reside in the accounts, back to the account holders. No tax dollars are used.

4. Does the federal government borrow?
Unlike state and local governments, the U.S. federal government does not borrow. Why would it? Being Monetarily Sovereign, it has the unlimited ability to create dollars.

Though accepting deposits into Treasury Security accounts sometimes wrongly is called “borrowing,” those dollars are not used by the government. They stay in the accounts, earning interest, until maturity, at which time they return to the account owners.

The term “borrow,” implies that the borrower has some need of, or use for, the thing being borrowed. The federal government has neither need of, nor use for, the dollars deposited in T-security accounts.

The purposes of federal T-securities are:

To help the Federal Reserve control interest rates
To provide a safe parking place for unused dollars, which stabilizes the dollar.
To convince the public that the federal government does not have the unlimited ability to create dollars.

(#3 helps the very rich prevent the public from demanding more social spending.)

5. Does federal deficit spending cause inflation?
Federal deficit spending adds growth dollars to the economy.

There is a popular myth that “excessive” government spending causes inflation. The common belief is that increasing the supply of dollars, without increasing the demand for dollars, would make each dollar less valuable, which is the definition of “inflation.”

While the total of deficits (blue line) has increased massively, inflation (red line) has been comparatively modest.

In reality, however, adding dollars to the economy puts spending-dollars into consumers’ pockets, which grows the economy and increases the demand for dollars. (See #6.)

Since 1947, the U.S. federal deficit increases have totaled more than 80,000%, while prices have increased significantly less.

The illusion of deficit spending causing inflation comes partly from the images of wheelbarrows filled with money during hyperinflations.

But those were examples of hyperinflations causing currency printing, and not the other way around.

Example: Zimbabwe. Farmland was taken from white farmers and given to blacks who did not know how to farm. Food shortage and then hyperinflation predictable results.

Inflations are caused by shortages, usually shortages of food or oil.

6. How is inflation prevented and cured?
The standard, recommended cure for inflations and hyperinflations is to reduce government spending, aka “austerity.” Unfortunately, this actually can worsen the problem by exacerbating the shortages.

The best prevention/cure for modest inflation: First raise interest rates to increase the value of the currency. This can be done quickly and incrementally, without the need for time-consuming, politically-tilted debates in Congress.

Meanwhile, to prevent/cure more serious inflations, increase government financial support for farming and oil exploration. Because this requires a counter-intuitive increase in government spending, it can take longer for a government to implement, but it is the only path to ending an inflation.

In extraordinary circumstances, it may be necessary to introduce a new currency, while focusing financial efforts on food and oil supplies. Until food and oil shortages are cured, inflations and hyperinflations cannot be cured.

7. How does Modern Monetary Theory (MMT) differ from Monetary Sovereignty (MS)?
These two economic philosophies agree that the federal government cannot run short of its own sovereign currency, the U.S. dollar, federal taxing does not fund federal spending, and that federal deficit spending adds growth dollars to the economy.

They further agree that the federal “debt” is not a burden on the federal government or on federal taxpayers.

MMT’s primary goals are full employment (effected by a Jobs Guarantee) and a stable currency.

In contrast, MS’s primary goals are economic growth and a reduction in income/wealth inequality (via the Ten Steps to Prosperity, below).

Since the great recession of 2008, unemployment (blue line) has dropped to low levels, and inflation as been within the Federal Reserve target of 2.5%. That would mean the economy already has met MMT’s goals. Presumably then, for MMT, all is well.

But wealth/income inequality has grown markedly, so clearly MMT’s goals are inadequate.

GINI index for the United States

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually.

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

Pumping gasoline into your car is good. Therefore pumping gasoline into your dog is good.

Pumping gasoline into your car is good. Therefore pumping gasoline into your dog is good. And while you’re at it, toss a couple bones into your gas tank Image result for dog at gas station

This would be O.K. if your dog was identical to your car.

Unfortunately, the writer of an article in THE WEEK doesn’t seem to know the difference between a dog and a car, or more to the point, he doesn’t know the differences between federal finances and state finances.

Here are a few excerpts from his article, followed by my comments:

Trump has taken the GOP’s ‘Kansas experiment’ national — with predictable results
Conor Lynch, August 28, 2019

It did not take long after former Kansas governor Sam Brownback signed the state’s historic 2012 tax cuts — hailed at the time as “one of the largest income tax cuts in Kansas history” — into law for it to become apparent that critics of the so-called “Kansas experiment” had been correct, while proponents of the legislation had been spectacularly and unambiguously wrong.

Advocates had promised enormous growth and a plethora of new jobs, but over the next few years the Kansas experiment went exactly as critics had anticipated: economic growth lagged behind other states (and the national average), the state budget collapsed, and Kansas gained fewer jobs than its northern neighbor, Nebraska, which has about a million fewer people.

Within a year of the bill’s passage, state revenues plummeted by about 10 percent, creating a massive deficit that led lawmakers to cut spending in infrastructure, Medicaid, education, and other areas.

The Kansas government, and indeed the governments of all U.S. states, counties, and cities, are monetarily non-sovereign. That means, they do not have their own sovereign currencies with which they can pay their bills.

Instead, they use the sovereign currency of the Monetarily Sovereign, United States government: The U. S dollar.

And so, the states can, and often do, run short of dollars.

(Some local government units, and even businesses, have created sovereign currencies for limited use within a defined area, but in no case do they have broad acceptance.)

Because the U.S. government uniquely is Monetarily Sovereign, it has the unlimited ability to create U.S. dollars. It never, unintentionally, can run short of dollars.

Even if the federal government did not collect a single penny in taxes, it could continue spending — even spending dramatically increased amounts — forever.

You might ask, “If the federal government doesn’t need tax dollars, why does it bother to collect tax dollars?”

There are four* main reasons, and two of them may shock you:

1. To control the economy. The government taxes heavily those activities it wishes to discourage (alcohol, tobacco), and offers tax breaks for those activities it wishes to encourage (homeownership vs. renting, deductions for health care, charitable deductions, IRAs, etc.).

2. To increase demand for the U.S. dollar, by requiring that taxes and other debts to the government be paid in U.S. dollars. This is considered the primary reason by followers of Modern Monetary Theory (MMT).

3. To please rich political donors. By taxing all forms of income, while providing the rich with shelters from those taxes that the rest of us must pay, the federal government appeals to the Gap Psychology desires of the rich.

“Rich” is a comparative term. Someone owning $100 is rich if everyone else owns only $1, but someone owning $1 million is poor if everyone else owns $10 million.

The rich always want to be richer. To do so doesn’t require obtaining more money. Simply widening the gap between those below, makes them richer, by definition.

Gap Psychology is a description of the desire to be richer by distancing oneself from those below (on any measure), and by narrowing the gap with those above.

The federal tax laws are designed to appeal to the Gap Psychology of the rich. They are designed to make the rich, who run America, richer.

4. To hide the truth from you. If the government didn’t collect taxes, you would begin to understand that not only are federal taxes unnecessary, but more importantly, you would learn that federal spending is not dependent on federal income.

This means such benefits as Medicare and Social Security are not limited by so-called “trust funds,” and neither of these programs (or any other federal program) can run short of funds unless Congress and the President want it to run short.

Increased social spending would narrow the Gap between the rich and the rest of us, and so, in actuality, make the rich less rich. The is the last thing the rich, who run America, want.

The article continues:

The state’s public school system was shattered, its roads and bridges deteriorated as money from the “highway fund” was transferred to pay for growing budget shortfalls, and the state’s credit rating was downgraded, raising borrowing costs as debt piled up.

By 2017, the state’s Republican (and Democratic) lawmakers had no choice but to repeal many of the tax cuts after five years of fiscal and economic devastation, ultimately overriding Brownback’s veto of the repeal legislation.

Yes, that is exactly what happened and always will happen to any monetarily non-sovereign entity that loses income while increasing spending.

Like Kansas, you are monetarily non-sovereign, so if your income were cut (for instance, you lose your job) you very well might need to cut your spending.

This is not true of the Monetarily Sovereign federal government.

More from the article:

If what happened in Kansas from 2012 to 2017 was truly an experiment meant to prove or disprove certain theories about fiscal policy, then it was an unequivocal triumph for opponents of supply-side economics.

And if proponents were seriously interested in the truth, they would have at the very least begun to question the central claims that have guided Republican fiscal policy for the better part of the last 50 years.

For knowledgable and honest economists (who seem to be in scarce supply), Kansas was not an experiment to prove or disprove federal financing, any more than feeding gasoline to your car is an experiment to prove or disprove the effects of feeding gasoline to your dog.

This did not happen, of course, and just a few months after Kansas ended its disastrous “experiment,” Republicans in Washington started their own experiment, this time for the entire country.

Repeating the same talking points we heard five years earlier in the Sunflower State, Republicans cut federal income tax rates for the wealthy and slashed the corporate tax from 35 percent to 21 percent, all the while promising that it would spur massive growth that would make it essentially revenue neutral — “We can pay for these tax cuts with economic growth,” declared Treasury Secretary Steven Mnuchin.

This was completely contrary to reality, and analysts forecasted a drop in government revenue by around $1.5 trillion over the next 10 years. It was even questionable whether the tax cuts would really spur much growth.

As always, Munchin lied. We cannot “pay for these tax cuts with economic growth.” Nothing pays for a cut. It’s a cut, not an expense.

Image result for bernanke — Ben Bernanke, former Fed Chairman: ” “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to **produce as many U.S. dollars as it wishes** at essentially no cost.”

And federal taxes, themselves, do not pay for anything. In fact, federal taxes are destroyed upon receipt.

State and local tax dollars are not destroyed. They are saved in public bank accounts, from which state and local bills are paid. At any moment in time, one can learn how much money his state has.

But it is not possible to learn how much money the federal government has, for the federal government has infinite money.

“The experiment in Kansas has important implications for federal tax reform,” wrote Brookings Institution’s William Gale before the GOP tax bill, “the first being not to expect tax cuts to boost the economy much, if at all.”

Actually, the tax cuts did boost “the economy,” somewhat. By the usual definition, “the economy” is Gross Domestic Product (GDP).

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports

Tax cuts, by leaving more money in consumers’ and business pockets, allow more for Non-federal spending.

The tax cuts took effect in 2018, when they caused a significant bump in GDP growth.

Subsequent events, i.e. Trump’s trade war, which effectively was a tax increase in 2018, erased the effects of the tax cuts.

The article continues:

Just like the Kansas experiment, it hasn’t taken long for critics of the “Trump experiment” to be vindicated.

Last week, the Congressional Budget Office said that the federal deficit is set to reach $960 billion in the fiscal year of 2019 and projected that it would average $1.2 trillion annually over the next 10 years.

That’s an increase of nearly $400 billion from Obama’s last year in office (and $300 billion from Trump’s first year).

This unprecedented growth of the deficit during a time of economic boom (when the deficit is typically expected to remain steady or even decline) is a direct consequence of the Republican tax cuts, along with a sharp increase in the wasteful and bloated defense budget.

The critics of the are “vindicated” only by their own false beliefs.

The increase in the federal deficit merely means that that the federal government is pumping more growth dollars into the economy. I challenge any economist to provide evidence that this is bad for the economy.

And by the way, so-called “wasteful,” federal spending (by however one defines “wasteful”) actually helps grow the economy by putting dollars into consumers’ pockets.

Trump has been riding high on the economy for the past two years, but his reckless policies, from tax cuts to his trade war with China, are starting to catch up to him, and as signs of a coming recession become more apparent, the president has become even more detached from reality.

The trade war is just one of many stupid and reckless policies by a stupid and reckless President and his party. These policies can lead to a recession or worse.

And while the tax cuts for the rich may be widening the Gap, they are helping to prevent the recession. Whether they will be sufficient is the question.

The Daily Beast reported earlier this month that sources who have spoken with the president about a possible recession since 2017 say that Trump thinks “recessions or booms are often self-fulfilling prophecies,” and believes that he can “will the economy in a positive direction by feeding optimism to the ‘American spirit.'”

It’s unclear if this is what he was trying to do on Friday, when he went on an unhinged (even by his standards) Twitter rant against China, ordering American companies to “immediately start looking for an alternative to China,” which predictably caused the stock market to plunge.

After the market closed, Trump announced that he was raising his 25 percent tariffs on $250 billion in Chinese goods to 30 percent, while increasing his planned tariffs on the $300 billion in remaining imports from 10 to 15 percent, ratcheting up the trade war.

Yes, Trump is an incompetent psychopath. That cannot be denied. And he has inflicted great damage on many Americans and on people all over the world.

But again, this has nothing to do with the failed Kansas experiment.

Continuing the article:

The chief financial economist at MUFG Union Bank, Chris Rupkey, recently told the Washington Post that Congress and the Federal Reserve would be unable to combat another recession in the near future because of the already low interest rates (which have been close to zero for almost a decade) and the ballooning deficit.

“Both sides are out of bullets. I’ve never seen a situation where there’s a recession cloud on the horizon but Washington is totally unprepared to deal with a downturn in the economy.”

There are “precious few working tools left at policymakers’ disposal,” says another financial analyst for Société Générale, Albert Edwards, who sees a global recession right around the corner.

Rupkey and Edwards are absolutely wrong. The Federal Reserve has the unlimited ability to pump growth dollars into the economy.

Image result for greenspan — Alan Greenspan, former Fed Chairman: “**Central banks** can issue currency, a non-interest-bearing claim on the government, effectively **without limit**. A government cannot become insolvent with respect to obligations in its own currency.”

Congress has the unlimited ability to pump growth dollars into the economy by passing spending laws.

A recession is when the economy declines significantly for at least six months. There’s a drop in the following five economic indicators: real gross domestic product, income, employment, manufacturing, and retail sales.

All recessions have at their core, a lack of real money in the economy, and all recessions can be cured by pumping real dollars into the economy.

Recessions (vertical gray bars) **begin with reductions** in federal money growth (red line) and are **cured by increases** in federal money growth.

*Earlier in this post, we listed four main reasons for federal taxes. There is a popular myth that federal taxes, by reducing deficit spending (aka “money creation), help prevent inflations.

This myth assumes deficit spending causes inflations, and those photos showing people using wheelbarrows to carry enough currency to buy bread, still linger in the public memory.

The false assumption is that money creation reduces money value, i.e inflation. Wrong. It was the inflation that caused the currency-printing, not the other way around.

Fact: Inflations are caused by shortages of food or energy (oil, gas, coal, etc.) Over the past 75 years, massive money creation by the federal government has coincided with moderate inflation.

While federal money creation (blue line) has grown significantly, inflation (red line) has been moderate

There is zero relationship between changes in federal money creation (blue line) and inflation (red line).

The article continues:

In Kansas, Republicans ultimately had to repeal their own policies and overrule their own governor’s veto; it is doubtful whether Republicans in Washington would be willing to stand up to Trump.

Yes, Kansas was doomed from the beginning. Economists could see that. Image result for trump hugging flag

And yes, Republicans, formerly the moral party of “law and order,” have lost their moral center and despite ostentatious flag hugging, they have abdicated any real concern for America.

They will not stand up to an obviously immoral, lying incompetent President.

The article continues:

Republicans started this war long before Trump’s unceremonious arrival.

Now the president seems to think he can not only “will the economy” in a positive direction but will reality to fit his fictional universe.

As the economy stumbles, however, it may all come crashing down on that vision.

On Sunday, at the G-7 gathering in France, Trump floated the idea of declaring a “national emergency” because of the trade war that he started with China; if a recession comes between now and the 2020 election, how the president will respond is anyone’s guess.

The President will respond in the usual way: By pointing his finger at the Fed, exporters, importers, China, Barack Obama, Hillary Clinton, Bill Clinton, the “FAKE media,” and some of his advisors.

He will accept no blame.

Finally, the article ends with a perfect description of Trump’s followers — the people cheering his speeches, while he takes, takes, takes from them the beautiful American democracy in which they thought they lived.

Republicans have been stubbornly denying reality for decades, and the more discredited their economic worldview becomes, the more committed they seem to become, demonstrating the great psychologist Leon Festinger’s claim that those who are presented with “unequivocal and undeniable evidence” that their beliefs are wrong will frequently emerge “not only unshaken, but even more convinced of the truth of their beliefs than ever before.”

Unlike the false thrust of Conor Lynch’s article, that Kansas’s financing is an example of federal financing, his very last paragraph is frighteningly true.

In summary, Monetarily Sovereign financing is nothing like monetarily non-sovereign financing, and those who use one as an example of another, have no understanding of economics.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually.

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

Suderman spreads the BS, then contradicts himself: Medicare edition.

Spoiler alert. This post:

Quotes Peter Suderman
Who is selling snake oil
And who contradicts his own premises.

Here are excerpts from his article:

Health Care Spending Is Out of Control
Health insurance doesn’t just protect people from financial ruin. It insulates them from individual decisions about price and service quality.
PETER SUDERMAN | FROM THE AUGUST/SEPTEMBER 2019 ISSUE of REASON

Health care in America costs too much because we pay for it the wrong way. And it’s all but certain that we’re going to continue doing so for a very long time.

The crux of the problem is third-party payment, or, as most people think of it, insurance.

The crux of the health care problem in America is insurance??? Americans would be better off if there were no health care insurance???

Pass me another swig of snake oil.

Health insurance doesn’t just protect people from financial ruin. It insulates them from individual decisions about price and service quality.

Those decisions become invisible, outsourced to a middleman—either a private insurer or a federal program—while the patient whose health is at stake is removed from the equation. The result is a system where prices are inscrutable, if they can even be called prices at all.

More spoiler alert: Suderman’s premises are:

Health insurance is bad for America because it relieves you of an impossible task: Shopping for the best and also least expensive hospitals, doctors, nurses, etc. (He later will contradict this nonsense in his own article)
Employees are the ones who actually pay too much for health care insurance when it is provided “free” by businesses. (He doesn’t actually say this, but he should have. It’s the one thing to which I would have agreed.)
Federal taxpayers and the federal government can’t afford to pay for the increasing cost of Medicare. (This demonstrates his colossal ignorance of Monetary Sovereignty and federal financing).

The dominance of third-party payment is almost entirely a result of two policy decisions that have warped the nation’s health care system for decades.

The first was the decision to allow employers to provide fringe benefits, including health coverage, tax-free. This created an incentive for employers to provide more expansive and more expensive coverage.

It made an extra dollar in salary, which would be subject to taxes, worth less than an extra dollar in benefits, which did not incur taxes.

Apparently, Suderman would prefer that employees and employers pay taxes on health care payments, which would reduce the number of companies that would pay for it, and the number of people who would receive it.

These reductions would benefit America how? He never says.

The result is that most private insurance is provided through employers, and it tends to be reasonably comprehensive, covering everything from ordinary doctor visits to foreseeable surgeries to truly catastrophic events.

Ooooh, “reasonably comprehensive” health care insurance. This is a bad thing, how? Suderman never says. Apparently, he thinks you should have insurance that won’t pay for . . . what?

Because employers and insurers manage the costs for everything, patients have little incentive to shop based on prices or quality, which can be difficult to determine anyway.

In addition, employers typically pay a large share of the monthly premium, meaning that tens of millions of people are kept ignorant about not only the cost of medical services but the true price of the insurance itself.

Here is where he contradicts his own premise. How many people are capable of intelligently shopping for health care based on prices and quality, which Suderman admits “can be difficult to determine anyway”?

If doctor “A” may be a less skilled diagnostician than doctor “B,” but also is less costly for some procedures, but not for others, by what intelligent criteria can a layperson measure dollars vs. quality of care?

Taking price out of the equation simplifies the task for the average person. Only the very rich can afford to say, “I want the best, no matter the cost.”

As for the rest of us, are we would be left to say, “I can’t afford the best health care, so I’ll settle for the surgeon with the shaky hands.”

Seemingly, that is what Suderman wants for you.

The second policy decision was the introduction of Medicare (and, to a lesser extent, Medicaid) in the 1960s.

Medicare expanded a system of government-run third-party payment to seniors, who, for understandable reasons, consume an outsized share of health care services.

The result was a huge new revenue stream for the health care industry, which rapidly reorganized itself around extracting funds from the program—which is to say, from American taxpayers—by any means possible.

Apparently, Suderman thinks Medicare is a bad thing, because it provides “a huge new revenue stream for the health care industry.” The fact that it happens to provide affordable medical services for the elderly is not really a consideration to Suderman.

And there it is again, the ignorance of federal financing. After all these years of promulgating misinformation, Suderman hasn’t learned that state taxpayers fund state spending, and local taxpayers fund local spending, but federal taxpayers do not fund federal spending.

Suderman doesn’t understand (or doesn’t want you to understand) the fundamental differences between federal financing and state/local government financing.

(The federal government is Monetarily Sovereign. State and local governments are monetarily non-sovereign.)

Suderman’s ignorance about this basic fact is pitiful.

In the first year alone, average daily charges for U.S. hospitals shot up by 21.9 percent, according to professors Ted Marmor of Yale and Jon Oberlander of the University of North Carolina at Chapel Hill.

The rate of growth of physician fees more than doubled in the year between the law’s passage and Medicare going into effect.

During the first five years of the program’s existence, reimbursements through the program grew by 72 percent, while enrollment grew by just 6 percent.

And still, America is short of doctors, nurses, and hospital space. But Suderman wants to cut doctor, nurse, and hospital compensation. That should help America.

Better yet, cut Suderman’s compensation, and pay doctors and nurses more. We need more doctors and nurses, and fewer writers that spread disinformation.

In their recent book, Overcharged: Why Americans Pay Too Much for Health Care (Cato), Silver and Hyman argue that the U.S. health system is best understood not as a means of delivering the best possible care but as a system for funneling as much money to health care providers as possible.

Medicare, they note, will pay for countless expensive in-hospital tests and treatments for a dying individual but not less expensive palliative care offered in that same individual’s home.

Suderman not only wants less money for doctors, nurses, and hospitals, but less for tests and treatment of “dying individuals.” (“We’re cutting off your treatments, Mr. Jones. You’ll be dead in a month, anyway, so this will just make it come a bit sooner. We hope you don’t mind.”)

And yes, the government should pay for palliative home care, just as it pays for hospice (though Suderman probably would complain about that, too, because he complains about all federal spending).

There are few meaningful checks on doctor reimbursements under the program; fraud and waste are pursued after the fact (if at all), which means doctors can always be assured of payment.

Wrong. Medicare and all private insurance companies do place limits on doctor reimbursements. In fact, Medicare’s limits are too low. Suderman surely knows this, so why does he claim otherwise?

Suderman claims your doctor is a wasteful fraud. Apparently, most doctors are, if Suderman says so.

He doesn’t like it that your doctor is “assured of payment.” Better that your doctor should have to sue or beg for payment??

The tax carve-out for employer-sponsored insurance pushes people into more comprehensive coverage, which increases overall demand for health care services, which makes health care providers more money.

If there is anything that angers Suderman, it’s people like you receiving the same “comprehensive coverage” he has.

And having such good care makes you go to the doctor when you aren’t even sick, right? Because you love getting stuck with blood test needles, and enduring digitals, just for the fun of it.

Suderman, who probably has comprehensive coverage, doesn’t want you to understand that overall demand increases when earlier programs were substandard.

It was as if the system was designed with only one goal in mind—maximizing not health or patient satisfaction but the amount of money Americans spend on health care.

The fiscally ruinous results speak for themselves.

Yes, the fiscally ruinous results of not having comprehensive care, have greatly been reduced by health care insurance. Apparently, Suderman believes only rich people deserve comprehensive care.

Silver and Hyman note that the Surgery Center of Oklahoma, a clinic that posts prices online and focuses on patients who pay cash, charges less than $20,000 for a knee replacement; the average price paid across the country is $57,000.

Uh, Peter, who are the people who can afford to pay $20,000 cash for a knee replacement? That’s right, the rich. They are the ones who trot to the Surgery Center of Oklahoma for the best care.

And what happens to the people who can’t afford $20,000 cash? Presumably, the Surgery Center of Oklahoma turns them away.

Fortunately, most people have that health care insurance you so despise.

And, the others just limp along on bad knees.

Direct payment by quality-conscious consumers is an effective way of bringing down costs and total spending. Which is exactly why it will never happen at scale.

No, direct payment by consumers won’t happen because it already has been tried, here and everywhere.

It’s called, “doing without insurance.”

Heading into the 2020 election, Democrats have proposed multiple ways of expanding Medicare, including pushing Medicare for All, a single-payer system in which the government finances nearly all health care services in the United States.

Right. And what exactly is wrong with that? Suderman never says.

The failed 2017 (Republican) effort to “repeal and replace” Obamacare would have left much of its infrastructure, including most of its spending, in place.

“ . . . Left much of its infrastructure (and) most of its spending in place“??? What the hell is Suderman talking about? He has zero idea about what would be “left in place.” He’s just babbling ignorance.

And what spending would be “left in place”? Spending by whom? Surely not by the government. It’s the spending that the GOP wants to cut.

The best hope for change is very bleak indeed. Medicare is racing toward a predictable fiscal crisis. The program’s actuaries predict it will be insolvent in 2026, able to pay only about 89 percent of its bills. That percentage will drop below 80 percent in the coming decades.

The system as it exists today, in other words, is unsustainable. It simply can’t go on like it is—and if Congress continues to do nothing, it won’t

And then we finish off with the old “federal spending is unsustainable” lie. It’s the same lie that Suderman and those of his ilk have been telling since 1940 –even before he was born.

Back then, the federal debt was $40 Billion, and called a “ticking time bomb.“ Today, it is 50,000% higher at $20 Trillion, and that old time-bomb stills a’tickin’. Wrong for 80 years; still wrong, today.

I am tempted to say that Suderman and his ilk are damn fools, but that would give damn fools (like, for instance, Trump backers) a bad name.

So I’ll be kind and just say Peter Suderman is misinformed, and tries to make you uninformed, too.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually.

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

The surprising reason why pharmacology is so difficult, really almost impossible.

It’s an all-too-familiar story. A laboratory somewhere announces that they have discovered a chemical formula that cures a previously intractable disease like cancer.

It works perfectly in Petri dishes, and in mice, and even in monkeys, and now the human trials begin.

Months later, we read that the formula not only didn’t work, but it made the patient sicker.

Why is pharmacology so difficult?

Biological evolution is nothing like human thinking. Biological evolution is much more like machine learning.

Consider the article titled, “Attacking Machine Learning with Adversarial Examples.”:

Adversarial examples are inputs to machine learning models that cause the model to make a mistake; they’re like optical illusions for machines.

To get an idea of what adversarial examples look like, consider this demonstration from Explaining and Harnessing Adversarial Examples: starting with an image of a panda, the attacker adds a small perturbation that has been calculated to make the image be recognized as a gibbon with high confidence.

An adversarial input, overlaid on a typical image, can cause a classifier to miscategorize a panda as a gibbon.

To the human eye, both panda pictures seem identical, but the machine “sees” them differently.

Pharmacology is difficult and machine-learning can be inscrutable, for essentially the same reasons. They do not follow the straight-line logic of human thought.

Consider this A to B puzzle.

Image result for a to b

To the human brain, the algorithm for traveling from A to B might be:

Begin at A
Travel along the dotted line to the airplane.
Pass through the airplane to B.
Stop.

Now consider this maze. What is your algorithm for going from one opening to the other?

Your algorithm might be:

Enter at either the top-left or bottom-right opening.
Take any route.
If that route gets you to the other opening, stop.
If that route doesn’t get you to the other opening, go to #5.
Enter at either the top-left or bottom-right opening, and take a different route from any route you ever have taken previously.
Go to #3.

That’s the way you, as a typical human, might operate.

But this is the way a machine might begin:

Erase half the lines.
If you come to a dead end, open it and continue.
Fold the paper in half so one opening touches the other.
Draw a new maze.
Write new rules.
Jump up and down on the maze.
Marry someone who owns a compass.
Ask for the solution.

In short, both evolution and machine learning defy human rules and logic. but after many, many moves, might take you from one opening to the other.

For instance, if you marry someone who owns a compass (#7), that person also might happen to own a diagram that happens to show the solution to the maze. That’s how evolution operates.

The process may require millions of iterations, but computers work fast and evolution has plenty of time.

So those millions of iterations very well could provide a solution. It’s similar to the old story about the infinite number of monkeys pressing an infinite number of computer keys, and at some point (an infinite number of points, actually) they type all of Shakespeare’s plays.

Humans always are time-constrained. Biological evolution is not, which means that the paths to the survival of life can be mind-bendingly complex.

I thought about this when I came upon an article:

How tumors hide from chemotherapy
Bob Holmes

For decades, cancer researchers have wondered whether they could starve tumors into submission by choking off their blood supply and thus preventing their fast-growing cells from getting enough food and oxygen.

They developed a drug, Avastin, that blocks a molecular signal triggering blood vessel growth, or angiogenesis.

But, mysteriously, Avastin failed to improve survival unless patients received chemotherapy drugs at the same time — implying that Avastin was somehow helping the chemo to be more effective.

That piqued the interest of Rakesh Jain, a cancer researcher. “How can a drug that kills the blood supply help chemotherapy? You need the blood supply to get the drugs into the tumor.”

He started digging deeper, and what he found turned conventional wisdom on its head.

The blood vessels that deliver food and oxygen — and chemotherapy drugs — to a tumor tend to be highly abnormal.

Instead of the usual large, straight, simply branched vessels, the ones in and around a tumor are often unevenly distributed, misshapen, and tangled.

As a result, some parts of the tumor end up far from any blood vessels and thus have little exposure to chemo.

Those same regions become starved of oxygen, and this hypoxia suppresses the immune system and also acts as a signal for the tumor cells to metastasize, or disperse to new sites.

(The blood vessels that supply a tumor often become misshapen and tangled, preventing chemo drugs from reaching the tumor. Drugs that restore normal blood flow can help make chemo more effective.)

Moderate doses of Avastin don’t outright suppress formation of blood vessels around a tumor but can actually make them look more normal, so that they can deliver chemotherapy more efficiently and evenly.

Jain’s clinical collaborators found — surprisingly — that patients who responded with increased blood flow to the tumor lived longer than patients in whom the blood flow declined.

Angiogenesis inhibitors work, in other words, for exactly the opposite reason than scientists initially thought.

Because we are the result of evolution, and evolution uses counter-intuitive “thinking,” solutions to our physical problems can come from that same, counter-intuitive thinking.

Consider, for example, the “illogical” the use of stimulants to combat ADHD:

Most parents wouldn’t give a child with attention deficit hyperactivity disorder (ADHD) a caffeinated drink, for fear that their hyperactivity would only worsen.

So why do doctors give stimulants to kids with ADHD? It seems so counter-intuitive.

Evolutionary “thinking” and machine learning are not straight-line. They both are the product of “random walk,” processes, in which each step is non-directed, but evaluated for success or failure.

File:Random Walk Simulator.gif — Five eight-step random walks from a central point. Some paths appear shorter than eight steps where the route has doubled back on itself.

If a step has some immediate value, or at least is not fatally harmful, it is retained as the basis for a next step, even though that earlier step may not have seemed to bring one closer to an ultimate solution.

Human thinking seeks solutions. We don’t have the time or capacity to retain and use all the various steps that might have had immediate value or not been fatallly harmful.

There are many routes to “survival of the fittest” (or more accurately, “survival of the fit enough“). Within our lifetimes, we can’t try them all.

Machine-learning works fast, but it doesn’t display its individual steps. It can tell you where it is, but not how it got there.

In the “panda/gibbon” example, above, we do not see the steps that led to the misidentification. We do not see the “logic.”

Because our brains are made by natural selection, while logic is an artificial construct, we do not know the details of why the following illusion works:

Related image — **The illustration seems to quiver. Move it and it will seem to flap like a butterfly.**

Biological evolution and machine learning are similar in that they operate via the random walk, a seemingly illogical, unpredictable, and indirect process, alien to human thinking.

Unless, sometime in the distant future, we know, then program a computer with, the cause/effect of every atom and every linkage in the human body, while overcoming the limits of the Uncertainty Principle, we repeatedly will be amazed that when starting from A, B, C and reaching X, Y, Z, we did not pass through L, M, N.

And that is why pharmacology is so difficult, really almost impossible.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually.

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

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